finally got a solution in another forum, but thought i would post here incase someone else got the same problem.
seems the cause of the problem was because i was using hp altering ability (barbarian rage) and potions (endurance), so when i killed Valsheress i was below my normal hp level, then when i got sent to the gatehouse, the ability and poition had wore off and i remianed below 0 hp's. so the game would tell me i am permanently dead or i would sit at negative hp's and be unable to increase it.
i had to fight Valsheress at least a dozen times because i did not use the ability or potions of endurance. seems she deals out damage to you when you damage her and i had to recover hp's using a heal potion and a few cure critical wound poitions.
what a pain in the a$$